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Trap for the Unwary: It’s a Crime for Mortgage Lenders & Servicers to Not Keep Certified Borrowers "Safe at Home"

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020

by Brian Liebo, Esq. and Kevin Dobie, Esq.  
Usset, Weingarden & Liebo, PLLP
USFN Member (MN)

There are an ever-increasing number of people participating in programs across the country that protect the identities of certain borrowers. Unwary mortgage lenders and servicers can find themselves subject to criminal and civil penalties in certain states if they run afoul of the related laws. One such program is Minnesota’s “Safe at Home” project. 

Minnesota’s project, governed by Minnesota Statutes Chapter 5B and Minnesota Rules Chapter 8290, along with approximately 38 other states across the United States,  can provide home, work and school address confidentiality for people who fear for their safety for survivors of, among other things, domestic violence, sexual assault, or stalking. In Minnesota alone, there are over 3,000 program participants and the program is administered by the Office of the Minnesota Secretary of State.

When someone enrolls in Safe at Home, the state assigns a post office box address that the participant uses as a legal address for all purposes. Since all Safe at Home participants share the same assigned post office box, the participants are differentiated by a designated “lot number” that is unique to each participant. This lot number is not to be confused with those “lot numbers” typically contained in real property legal descriptions. The participant does not pick up their mail from that post office box. Instead, Safe at Home staff forward the first-class mail to the participant’s real residential address.  

The state certifies participants for the Safe at Home program in renewable terms of four years. Participants can lose the certification by changing their legal identity without advance notice or by using false information in conjunction with the certification. Also, certification can be lost if the mail forwarded by the Safe at Home office is returned as “undeliverable.” This latter issue is often relevant in mortgage default situations where a borrower abandons the home.

Impact of the Safe at Home Program on Mortgage Lenders and Servicers
A participant must disclose the address of the home to mortgage loan originators.  The participant will provide the lender with a Safe at Home program form, which will require the lender to conceal the mortgage record and will prohibit the sharing of their location information without signed consent from the participant.  The lender must also only use the participant’s assigned post office box address for mailed correspondence. For loans other than a home loan, such as vehicle loans or unsecured personal loans, a Safe at Home participant cannot be required to disclose their home address.

It is the responsibility of participating borrowers to affirmatively notify their lenders and servicers of their Safe at Home program participation and provide their assigned Safe at Home post office box address. If a lender or servicer wishes to contact the Safe at Home office to verify a borrower’s program participation, they must provide the potential participant’s name and lot number or name and date of birth. Thereafter, if a lender or servicer must disclose the name and address of the borrower participant to sell or service-transfer the loan, the lender must obtain the prior written consent of the participant and provide the name and contact information of the transferee to the participant, so that the participant may give the transferee the Safe at Home program notice. 

Safe at Home participants cannot, however, protect their information in property records retroactively. This means that if an individual purchases a property and obtains a mortgage without the required Safe at Home program procedures, the Safe at Home program will not apply. The Safe at Home office will not provide the required forms to individuals trying to enter the program after purchasing a home or when trying to refinance a mortgage that was not part of the program.

Once properly notified, the mortgage servicer or lender must accept a participant’s Safe at Home address as the person’s actual address of residence, school address, and as their address of employment. When mailing to a Safe at Home participant, the sender must always include the participant’s name and lot number.

A Safe at Home participant cannot be required to disclose his or her home address for financial account records. Thus, financial institutions must not require a participant to disclose his or her home address in order to be Customer Identification Program (CIP) compliant. For CIP compliance, instead of the participant’s home or business address, the financial institution is required to use a non-public, designated street address by the Office of the Minnesota Secretary of State, which can be obtained by calling (651) 201-1399.

If a mortgage servicer must serve a participant with legal process, the Office of the Minnesota Secretary of State acts as the agent for service of process for all program participants. In order for the Safe at Home office to accept service of process on behalf of a participant, the service documents must also include the participant’s name and lot number. This aspect presents an interesting issue for conducting nonjudicial foreclosures in Minnesota. The nonjudicial foreclosure statute in Minnesota requires that all “occupants” of the property be properly served with the foreclosure notices, in contrast to just all “borrowers.” Thus, service on the Secretary of State alone may be insufficient. Also, the foreclosure notices that are published and served would need to be limited as well to protect the Safe at Home borrower. Accordingly, it may be wise in such cases to proceed by judicial foreclosure, or carefully consider how the non-judicial foreclosure statutes can be complied with while also meeting the Safe at Home requirements.

Similarly, if a mortgage servicer or REO entity pursues an eviction action following foreclosure proceedings, they will want to ensure Safe at Home borrower or tenant occupants are protected from having their locations disclosed during the pendency of such an action. In various jurisdictions, it may be best to identify the case defendants as “John Doe and Mary Roe,” where acceptable to the courts, to maintain the required protections for program participants.

As a reminder, the Safe at Home participant is required to give private companies a special notice they obtain from the Safe at Home office. Receipt of the notice prohibits the private companies from sharing the participant’s name and location information with anyone unless the participant provides a prior written consent for a specific disclosure purpose. A violation of any of the provisions of the notice constitutes a misdemeanor punishable by imprisonment with a maximum time of 90 days, a fine up to $1,000, or both. 

As a practice pointer, it is critical that lenders and servicers have procedures in place to immediately identify Safe at Home participants, conceal and protect the participants’ location information system-wide, and ensure all future mailings are sent to the proper Safe at Home address. According to the Minnesota program administrator, a mortgage servicer is prohibited from even disclosing a participating borrower’s protected information to the servicer’s own agents and contractors. 

To comply with this legislation, a mortgage servicer should not share both the name and physical address of a program participant together to any third parties, absent written consent. For example, if a mortgage servicer wants a property inspection performed, the mortgage servicer should direct its vendor to inspect the physical address, without providing the name of the protected borrower to the agent conducting the inspection, unless written consent was provided by the Safe at Home participant expressly permitting the specific disclosure.

Finally, lenders and servicers will also want to coordinate with experienced, local counsel to help ensure full compliance with these types of laws through all aspects of servicing the mortgage loan.

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Tags:  Minnesota Rules Chapter 8290  Minnesota Statutes Chapter 5B  Safe at Home 

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